4.4.1.30 Scope of Deeming

Summary

This topic contains information on the following:

• the payments and programs to which deeming applies,
• financial assets (section 9(1)-'financial asset') to which deeming applies,
• the treatment of actual returns from financial investments,
• the treatment of investment costs, and
• the treatment of encumbrances (1.1.E.108) on assets.

Act reference: SSAct section 9(1)-'financial asset'

Payments & programs

Deeming does NOT apply to payments made under the FAAct. The following table shows the payments that ARE affected by deeming.

Financial assets to which deeming applies

Deeming applies to financial assets, which consist of:

• financial investments, and
• deprived assets (1.1.D.110).

Example: Financial investments to which deeming applies include:

• bank, building society and credit union cheque and savings accounts,
• cash,
• term deposits,
• cash management accounts,
• money held in solicitors' trust accounts,
• managed investments,
• listed shares and securities,
• bonds, debentures, unsecured notes, bank bills,
• loans made to individuals, private companies and trusts,
• shares in unlisted public companies,
• gold and other bullion,
• investments in superannuation and roll-over funds held by recipients who are over age pension age, and
• asset tested income stream (short term). See 4.9.3 for further details about income streams.

Act reference: SSAct section 9(4) For the purposes of this Act...

Policy reference: SS Guide 4.9.3 Asset-Tested Income Streams

Treatment of income from financial investments for deeming purposes

The actual returns received (if any) from financial investments are not assessed under the income test unless the Minister exempts the investment from the deeming rules.

Act reference: SSAct section 1083(2) If, because of ...

Policy reference: SS Guide 4.4.1.40 Exemption of Financial Investments from Deeming

Treatment of investment costs

Deeming applies to the gross current value of a financial investment.

Example: An income support recipient purchases a financial investment using $10,500, of which $300.00 was an entry fee payment. The value of the investment is therefore $10,200. This is the amount to which the deeming rules apply.

Treatment of encumbrances on assets

Under the deeming rules encumbrances are not taken into account. The GROSS market value of a financial investment is used to assess deemed income for the income test.

Under the assets test, the value of the asset is the recipient's EQUITY in the asset.

Example: A person has listed securities with a current market value of $25,000 and a loan secured against these securities of $10,000. Deemed income is calculated using the market value of $25,000 while the assessed asset value under the assets test is $15,000.

Act reference: SSAct section 1072 General meaning of ordinary income

Policy reference: SS Guide 4.6.6.30 Encumbrances & Loans Against Assets

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Last reviewed: 11 August 2011